Corporate Boards Are Glorified Thiefs
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- The Springboard
Springboard's rants, political spoutings, and random nothings. A hodgepode of opinion and commentary.
I have nothing against the rich. I should set that onto the table right off the bat. In fact, just the other day in my own comments on another hub I made reference to the expiring of the Bush tax cuts as sort of like throwing a boomerang like a ball. You keep on waiting for the ball to hit the rich guy, but it just comes back to hit you instead. There is nothing wrong with working hard and making it to the top, and having a reward for that. I am not condemning anyone for being successful. The problem that I have, is that I think the place where we are at in this current day has become more thievery than real, justifiable compensation for our top executives in this country.
I want you to consider one thing in particular which I will focus on, aside from CEO pay. That is, pensions. Pensions, of course, if you ask most people about what they impose on a company, it is that they obligate companies to provide lifetime benefits to their employees. It forces them to take care of their own in a sense. And this is seen as a terrible liability for the company. Pension plans cost companies enormous amounts of money. After all, they have to be managed and funded. That costs money. They have to earn certain returns in order to deal with the fact that the cost of living by the time the last penny will be paid to a pensioner will be greater. Some retiree benefits even include continuations of medical coverage, and this can be a costly line item as well for corporations.
Nowadays it's a difficult prospect to find a company that even offers a pension anymore. The last figure I've seen is that around approximately 18-20% of companies offer employees a traditional pension these days. Even in cases where traditional pensions are offered by companies, the benefits that will be paid out are not as good as they once were. Government agencies are, of course, the largest provider of pensions currently, but that topic is for another day.
In the case of corporate America, however, most CEO's still receive some sort of lifetime benefit which works out to be a very lucrative thing indeed. CEO's who make millions of dollars each and every year for their hard work, as we all know, will never earn enough money in their lifetimes to sock away a few extra bucks for retirement, and must be taken care of into their retirement. Of course you can see through to my sarcasm there, can you not?
Regular workers, on the other hand, will struggle to put away all they can in order to have perhaps a mediocre retirement at best.
I'm not suggesting that money should simply be given away for the sake of taking care of people. Pensions really are, in a way, a form of welfare, and companies are not in the business of providing that. However, it can be argued that in fact, the biggest welfare recipients in the corporate ranks are the CEO's and other top executives who receive very large salaries, bonuses, and pensions.
We have to attract talented, capable people to provide growth to our company, and ultimately to our shareholders. That's the age old argument to satisfy the masses that John Q. Executive is worth $20 million a year. Paul Hodgson, author of the book, "Building Value Through Compensation," remarked in 2006 to Michael Brush for MSN Money, that the average pension for CEO's who ran S&P 500 companies was $930,000 per year. By 2010 you can bet that number is higher. Pensions attract talent too, it would seem.
But how much talent is worth that much money? How can that much money for pay and compensation be justified when the average wage in this country for the rest of America is around $18.54 an hour, or roughly just under $40,000 per year? It is true that in an email conversation I had with John Torinus, chairman of Serigraph Inc. and a founder of BizStarts, who also writes a regular weekly business column for the Milwaukee Journal Sentinel, that not all CEO's are paid such enormous, multi-million dollar salaries, and that in fact, most CEO's are lucky to see even $1 million a year, even when you add in their bonuses. I'll concede that to a point. There's a lot more smaller companies out there than big ones. But it still gives me great pause to think that the CEO of McDonald's, for example, employs many people, is a very large corporation that takes in enormous dollar amounts in annual revenue, who also pays its employees very little, offers very little in benefits, and certainly do not offer a traditional pension plan. Yet in 2009, the CEO of McDonald's was paid $17.9 million and he also has a pension plan.
One side thought here. If you are working for one of the largest companies in America, heedless of your capacity, shouldn't you feel like you are working for one of the largest companies in America?
I'm not taking away from the fact that McDonald's stock and company has done phenomenally well throughout the recession. Its stock price only recently took a little dip as same store sales numbers disappointed even if overall sales were up. But how much is enough, I wonder? And if a guy making $17.9 million needs a pension, why on earth would the guy flipping the burgers for maybe $10 an hour not need one? I think it's an honest question.
CEO compensation has simply gone overboard if you ask me. And as for the talent? I think it's clear that that argument can be seriously debated. It's all of this talent that we pay so much for that nearly caused the world's economic collapse. And why aren't we suggesting that all jobs require someone who is talented and capable of performing it? Every job is important. Every job requires someone to fill it. Every job requires some knack.
I am not calling for someone to regulate CEO and executive compensation. But let's be honest with ourselves about what's going on when it comes to their pay. They, the top dogs, set the standard for the pay. They make the rules. They decide what is and what is not the right amount to attract the right talent. Shareholders don't have a say in that. Regular people don't have a say in that. It has nothing to do with what the market is willing to bear when it comes to CEO pay as Gary B. Smith, curator of Chartman.com and a regular guest on Fox News and Fox Business, said to me on Facebook. It has to with what the Boards of Directors of this country decide is right. And who are the boards? They are largely made up of other CEO's, former CEO's, and future CEO's.
Perhaps to call corporate boards thieves is a bit harsh, I'll admit. But should there be this widening gap between what the top gets and what the bottom gets? Should there be this blatant disregard and disrespect for the people who literally bust their ass at the bottom? If CEO's are the brains of the body, the workers are the heartbeat. You cannot live without either one. Why is a 3% pay raise at the bottom considered excellent, yet often times the CEO's receive compensation increases that are in the double digits percentage-wise. Skinner's $17.9 million salary, the CEO of McDonald's, was a 30% increase from the previous year. 30%!
I realize that if we brought most CEO compensation packages in our largest companies down to reality, it wouldn't add up to a major pay raise for the rest of America. There are a lot more of the rest of America than there are of them. But perhaps we could get down to a level of everyone respecting the other. The top should not be looking down at their employees and seeing them as bottom feeders, sucking the life out of their profits. And frankly I don't want to be at the bottom looking up at the CEO as a greedy jerk who talks cost cutting every minute of the day, except when it applies to what he'll be paid or what he thinks he deserves to be paid.
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